Chapter 2
Stocks and Shares
The thing used by big companies to raise their funds is called shares or stocks. Funds are essential for any company. These funds help company to buy new companies, clear the loans, get property and similarly other company related works.
In order to get these funds for various activities involved, a company has two options. Either it can borrow the funds or it can raise their own funds. Many companies prefer to raise their own funds because borrowing the funds becomes too much expensive. To gather funds the company gives a part of ownership in their company to the investors in the form of shares.
So you can also say that in other words to make it simple to understand, a stock is a part of ownership given by any company to the investors. The investor when buy any share by giving fund, he\she as a shareholder earns the right to participate in taking the important decisions of the company. Every share owned is equal to one vote. Not only this investors also get a share in the company profit in the form dividend checks. The value of any share depends on the company progress. If any company is going good and is making profit then the value for its shares goes up. Whereas similarly on the other hand if a company is going down the value of its shares also goes down. A shareholder can sell the owned shares anytime and make profit if the value of any share is high.
Many of the investors just buy shares and then never think about them for years. They just make money from the yearly given dividend checks given by a company making profit.
But there are another type of investors also who buy shares for the purpose of selling them. They are active traders, buy shares when the value of it is low and make profit by selling them as their value rises.
These investors have to buy and sell shares. For doing so they require a market where they can easily buy and sell shares. The whole process of buying and selling the shares of companies for making profit is called stock trading. In UK this market is termed as the London Stock Exchange.
It might sound easy but stock trading is a risky business for those who don't have much knowledge about it. In UK some people have lost everything to become the best stock traders, while many others have seen a huge loss in the same process.
But anyone can play safe and avoid being loser in stock trading. But it is only possible with correct information and a good planning. Anyone with good knowledge about stock trading can make a good profit out of it in a very less time. It is not important that you must put everything you have to be good in stock trading. With good planning you can become a good stock trader with little also.
These days the news about falling values of the shares is very much prominent, so it's easier for you to make a negative decision in investing in stocks. If you have never done this before it is quite hard time to invest these days. But before making any decision, take time to think and know some basics about stock market.